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    　　August economic data review: Domestic demand tepid; further policy support neededChina’s economic data for August shows that domestic demand remained tepid and weakened marginally compared to July. On the production side, YoY growth rates of the industrial and service sectors declined. On the demand side, external demand remained resilient, while YoY growth rates of domestic consumption and investment declined. Real estate development investment remained weak, with the YoY decline in 8M24 flat with that in 7M24.

    　　Infrastructure and manufacturing investment growth slowed slightly. The August price and financial data released earlier also indicates that demand had yet to improve. Looking ahead, economic growth momentum depends on the implementation of existing policies (government bond issuance, project construction, trade-in of consumer goods, etc.) as well as the introduction of new policies, in our view.

    　　How will Fed rate cuts affect H-shares?

    　　We think the H-share market has greater upside than the A-share market due to the former’s sensitivity to external liquidity as well as Hong Kong SAR monetary authorities’ options to follow suit after the Fed rate cut amid the linked exchange rate system. Nevertheless, structural rallies and consolidation within a wide range could remain the main trends before China significantly increases fiscal support. We believe the current decline in the 10-year US Treasury yield to 3.6% has fully factored in rate cut expectations. If the risk premium returns to the level in mid-2023, we think the HSI could rise to about 18,500-19,000 points. If earnings grow by another 10%, the HSI may surge to about 21,000 points.

    　　August housing data: Volume and prices down; real estate investment still weakThe National Bureau of Statistics (NBS) announced real estate development investment and sales data for January-August 2024 (8M24). In August, new home sales remained weak, and existing home sales marginally declined. Selling prices recorded a larger MoM decline, indicating a need for market-stabilization and risk-control policies.